(Recasts with market closing levels, analyst and IMF comments)
BUENOS AIRES, Dec 10 (Reuters) - Argentine over the counter bonds rose 0.3% on Tuesday after a more than 2% rally the day before, when investors registered their approval of the president-elect’s choice of a Columbia University debt restructuring expert as economy chief.
President Alberto Fernandez was inaugurated at midday, as longer-dated paper led the uptick in debt prices, traders said, showing some confidence in the new administration.
“The market reacted positively to the naming of ministers and signals from the new government,” local brokerage Portfolio Personal Inversiones said in a note to clients.
Moderate Peronist Fernandez thrashed incumbent free-markets advocate Mauricio Macri in the October election. Macri’s four-year term was marred by high inflation, economic stagnation and an 83.88% fall in the peso’s value against the U.S. dollar.
Argentina’s currency nudged 0.17% higher to 59.85 pesos to the greenback on Tuesday. A positive tone was set in the markets on Monday, the first trading day after Fernandez named Martin Guzman as economy minister.
Guzman, a 37-year-old academic with close ties to American economist Joseph Stiglitz, will be responsible for sparking growth, taming inflation and steering restructuring talks with bondholders and the International Monetary Fund over about $100 billion in debt.
Creditors had feared that Fernandez might take a tough stance in upcoming restructuring talks. But Guzman, who sees the problem as one of liquidity rather than solvency, has advocated for a debt revamp based on a suspension of payments that would preserve eventual repayment of principal.
Macri left the country in “virtual default,” Fernandez said during his inaugural address, in which he called for growth-oriented policies. “To be able to pay our debts, first we have to grow,” he said.
The IMF voiced support for Fernandez effort to reduce poverty through sustainable growth. “The IMF remains committed to assisting your government in this endeavor,” fund chief Kristalina Georgieva said in a tweet.
Macri took office in late 2015 on a wave of pro-market sentiment following eight years of interventionist policies under President Cristina Fernandez de Kirchner.
Macri had promised to “normalize” the economy, which he said had been distorted by heavy-handed trade and currency controls.
But he over-estimated his ability to attract investment and underestimated the inflationary effect of his fiscal tightening program, which included cuts to utility subsidies.
The cuts killed Macri’s popularity by causing increases in power and gas bills. Higher utility bills hurt family finances and boosted business costs, prompting retailers to increase consumer prices and derailing Macri’s re-election campaign.
Fernandez de Kirchner, Alberto Fernandez’s running mate, was sworn in as vice president on Tuesday. Facing corruption charges, which she dismisses as a political smear, Fernandez de Kirchner had stayed largely out of sight since the election. (Reporting by Hugh Bronstein and Walter Bianchi, additional reporting by Hernan Nessi; Editing by Dan Grebler and Sandra Maler)
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